Changing Face of the Texas Labor Market

Richard Froeschle richard.froeschle@twc.state.tx.usTexas Workforce Commission/LMCI(512) 491-4941www.lmci.state.tx.us

January 15, 2009

1. Current labor market conditions- Snapshot of current economic measures. What do the numbers tell us about the labor market relative to historical periods, e.g. Urate, payroll job growth, labor force growth, personal income, sales taxes, GDP growth, college enrollments & graduations, etc.

2. Where is the labor market headed. What do we expect the labor market will look like in the foreseeable future. How will the present situation change, e.g projected industry and occupational job growth and decline, expected demographics

3. What is the environmental context, business climate and likely structural transformations that will shape future job growth and creation. What are the larger trends that will influence business decisions and the demand for workers, e.g. impact of globalization, technology, demographic trends etc.

Tell Me About the Labor Market…

Economic Truth About Predicting Recessions

“ Nobody ever sees anything coming. Nobody saw stagflation coming, nobody saw the Great Depression coming, nobody saw Pearl Harbor or 9/11 coming. Really big, bad things tend to be surprises.”

Laurence Ball, economist at Johns Hopkins University

Understanding the Texas Economy: In Search of Convergent Validity

Gleaning Wisdom from Data…

• The Japanese eat LESS red meat and drink less red wine than do Americans or the British—and they have a much lower incidence of heart attacks.

• The Italians eat MORE red meat and drink much more red wine than do Americans or the British--and yet they too have a lower incidence of heart attacks.

We’re from Texas: What country are you from?• We have NASA so we control the space industry.• We have all the oil and gas that we will need for the next

300 years & refine over 85% of the gasoline in the U.S. • We have 65% of the Defense Industry; The term "Don't

mess with Texas," takes on a whole new meaning.• We got technology: Texas leads the nation in producing

computer chips and communications equipment.• We have our own food; Texas is self-sufficient in beef,

poultry, hogs, sea food & several types of grain, fruit and vegetables; and every Texan knows how to cook.

• We have a ready supply of workers. We could just open the border when we need some more.

Single Family Housing Permit (units)

Harry Truman is purported to have said,

All my economists say, “on the one, or

on the other hand”…what I really need is a

one-handed economist.

The Rise of Behavioral Economics

“Behavioral economics focuses on the ways humans fail to act as rational, self-interested beings that economic models call for—we aren’t good at thinking about the future, we’re susceptible to peer pressure, we overestimate our abilities and underrate the odds of bad things happening.”

Robert Shiller, Yale University economist

The “Two Minds” of the Global Economy I

• Difficult for smaller companies to compete

• Widening income and wealth inequality

• Job instability, job portability, job volatility, offshore potential of American jobs

• Big Box retailers give us one-stop shopping convenience (the WalMart premium)

• Global investment opportunities, diversified portfolio & higher rates of return

• More productive & profitable ways to do business; offshoring, temps, outsourcing, foreign skilled labor

As Citizens, we don’t like…

As Consumers/Investors, we like…

The “Two Minds” of the Global Economy II

• Soaring CEO pay relative to worker wages

• Lowered sense of “community” in a global world

• Reduced loyalty: firms to workers, workers to firms, consumers to firms (brand loyalty)

• More opportunities for entrepreneurs, more millionaires per capita!

• Better shopping! Access to “stuff” created anywhere in the world

• Global competition results in lower product prices

As Citizens, we don’t like…

As Consumers/Investors, we like…

3. Wealth Effect

4. Job Losses/Unemployment

Consumer Spending

2. Stock Prices/Investment Portfolio

The Downward Cycle for Consumers

1. Real Estate/Home Values

5. Borrowed Money/Credit

National Average Credit Scores

National Average is 680% of Population Credit Score

2% 300 - 4995% 500 - 5498% 550 - 599

12% 600 - 64915% 650 - 69918% 700 - 74927% 750 - 79913% 800 - 850

Credit Scores Affect Consumer BorrowingState Low FICO State High FICO

Texas 651 South Dakota 710

Nevada 655 Minnesota 703

Arizona 659 North Dakota 706

New Mexico 663 Vermont 706

Louisiana 663 Mass 703

South Carolina 665 New Hampshire 703

Oklahoma 666 Montana 701

North Carolina 667 Iowa 700

Mississippi 668 Maine 699

Georgia 668 Wisconsin 699

Unemployment has Many Faces• Frictional – Lack of information makes it difficult

for employers and jobseekers to locate each other in a timely & efficient way

• Seasonal – Different calendar periods are normally slower or more robust than average

• Structural – Mismatch between skills in demand and the skills and abilities of the workforce

• Cyclical or demand deficient – Insufficient economic activity causes even appropriately skilled workers to have trouble finding suitable employment

How is the Texas Economy Performing? It Depends on Your Personal Perspective!

It’s doing well if….

• Employed w/ marketable & transferable skills

• Nursing, Home Health Care• Medical/Drs. Assistants• Therapists &Therapy Aides• IT, DBA, Network Systems• Construction & Utilities• Wind, Renewable Energy• Teaching, all levels• Oil & Gas industry• Cross/Multi-disciplinary

It’s not doing well if…

• Unemp w/Undefined skills• Repetitive, Rules-based Jobs

• Textile/Apparel Sector• Small Farmer/Rancher• Telemarketer/Travel Agent• Financial Sector• Production Assembler• Order, Grocery or File Clerk• Mail & Postal Clerks • Low education, technophobic

• Geographically immobile

Texas Industry Job Growth from 2005 to 2008

NAICS Industry Net Growth Pct Growth

Educational Testing & Support Services 3,149 134.9%Ship & Boat Building (rigs) 3,690 82.4%Support Activities for Mining 43,906 56.3%Motor Vehicle Manufacture 3,452 55.8%Heavy Engineering & Civil Construction 5,748 49.4%Machinery & Equip Lease and Rental 5,103 46.7%Utility System Construction 21,912 44.4%Office Administrative Services (fee based) 15,646 44.2%Construction & Mining Machinery 13,979 41.7%Boiler & Shipping Container Manufacture 2,840 38.8%Marketing & Technical Consulting Services 20,983 37.5%

Texas Industry Job Growth from 2005 to 2008 NAICS Industry Net Growth Pct Growth

Elementary & Secondary Schools 49,484 6.8%Limited Service Eating Places 46,584 14.8%Support Activities for Mining 43,906 56.3%Full-service Restaurants 35,020 11.1%Employment Services 28,747 13.2%Home Health Care Services 25,509 15.4%Building Equipment Contractors 25,332 18.6%Architectural & Engineering Services 25,019 21.7%Utility System Construction 21,912 44.4%Marketing & Technical Consulting Services 20,983 37.5%Offices of Physicians 20,300 13.4%

Estimated Occupational Demand for 3,690 Job Increase in Ship and Boat Building Industry (NAICS 3366)

SOC Occupational TitleStaffing Pattern

Required Workers

Total, All Workers 100.00% 3,690Welders, Cutters, Solderers, and Brazers 21.00% 775Structural Metal Fabricators and Fitters 9.49% 350First-Line Supervisors of Production Workers 6.41% 237Team Assemblers 4.14% 153Fiberglass Laminators and Fabricators 3.80% 140Hand Laborers & Freight, Material Movers 2.89% 107Machinists 2.80% 103Plumbers, Pipefitters, and Steamfitters 2.78% 103Painters, Transportation Equipment 2.59% 96Helpers--Production Workers 2.27% 84Bookkeeping, Accounting, and Auditing Clerks 2.24% 83Electricians 1.95% 72

Fastest Growing Texas Occupations -- Bachelors Plus

Occupation Title (1,000 jobs)

Growth Rate 2006-16 Annual Pay

Network Systems/Data Com Analyst 55.5% $67,418Special Education Teacher 48.5% $44,824

Computer Software Engineer, Apps 46.3% $86,217

Physician Assistant 46.1% $81,959

Instructional Coordinator 43.4% $57,610

Teachers, Kinder thru Middle School 42.0% $44,216

Physical Therapist 38.9% $77,294

Athletic Trainer 38.7% $44,008

Anesthesiologist 38.5% $176,254

Obstetrician/Gynecologist 38.1% $190,362Graduate Teaching Assistant 36.3% $31,043

Most Openings Texas Occupations -- Bachelors Plus

Occupation Title (1,000 jobs)

Openings2006-16 Annual Pay

Teachers, Kinder thru Middle School 19,905 $44,216

General & Operations Manager 5,225 $102,239

Accountants & Auditors 3,960 $61,369

Computer Systems Analyst 2,740 $74,642

Business Operations Specialist 2,585 $64,384

Construction Manager 2,525 $66,435

Computer Software Engineer, Apps 1,880 $86,217Lawyer 1,660 $120,072Management Analyst 1,610 $68,715Insurance Sales Agent 1,585 $50,298Network & Computer Systems Admin 1,415 $64,037

Fastest Growing Texas Occupations -- Associates/Cert

Occupation Title (1,000 jobs)

Growth Rate 2006-16

Annual Pay

Physical Therapy Assistant 46.1% $51,589

Occupational Therapy Assistant 42.9% $51,764

Surgical Technologist 41.9% $37,286Cardiovascular Technologist/Technician 41.8% $44,461

Skin Care Specialist 41.5% $27,100

Veterinary Technologist/Technician 40.3% $25,271

Dental Hygienist 38.6% $63,225Respiratory Therapist 37.8% $47,659Registered Nurse 37.8% $59,714Radiation Therapist 35.3% $75,487Interpreter/Translator 34.9% $42,630

Most Openings Texas Occupations -- Associates/Cert

Occupation Title (1,000 jobs)

Openings2006-16 Annual Pay

Registered Nurse 8,565 $59,714

Restaurant Cook 4,120 $19,280

Nursing Aids and Orderlies 3,745 $20,690

Farmers & Ranchers 3,715 $35,432

Licensed Practical Nurse/LVN 3,375 $37,354

Police & Sheriff Patrol Officer 2,615 $46,454

Welders, Cutters & Brazers 2,415 $32,666Electricians 2,305 $38,775Computer Support Specialist 2,190 $44,025Auto Service Techs/Mechanic 2,160 $34,884Carpenter 1,640 $31,041

National Demand vs. Available Supply

Occupation TitleUnemployed/

Online Ads Average Wage

Total, All Occupations 2.31 $19.56

Food Preparation and Serving 9.88 $9.35

Building and Grounds Maintenance 9.81 $11.33

Production Workers 6.98 $15.05

Personal Care and Service 4.91 $11.53

Sales and Related 2.86 $16.94

Office and Administrative Support 2.19 $15.00

Business and Financial Operations .99 $30.01

Architecture and Engineering .58 $33.11

Healthcare Practitioners/Technicians .20 $31.26

Computer and Mathematical .14 $34.71

Conference Board

Online Job Openings in Texas September 2008372,529 total unique ads placed

• Registered Nurse (27,219)• Engineers (all) (9,984)• Customer Service Reps

(8,439)• Computer System Analysts

(8,167)• Retail Sales Supervisors

(6,884)• Physical Therapists (6,602)• Accountants (6,149)• Admin Assistants (6,051)

• Computer Support Specialist (5,580)

• Heavy Truck Driver (5,538)• Retail Salesperson (5,179)• Sales Managers (5,112)• Sales Reps, Man/Wholesale

(4,629)• Occupational Therapist

(3,970)• Applications Programmers

(3,968)• Web Developers (3,705)

Decomposition of Work: Net Job Change Masks Important Market Dynamics

1. Real industry growth viewed in terms of revenues, profits & market share, not necessarily jobs, e.g. Who’s making money vs. Who’s creating jobs?

2. Technological obsolescence & Labor substitution work activities made obsolete through technology, some replace workers

3. Emergence of new & blended occupations -combining job duties from 2 or more occupations into a single, “new” job… you’re a what? e.g. windmill turbine mechanics, cable installers

4. Connecting education and the economy: How to best match educational coursework & majors to employer skill needs, What do I study to become more employable?

Decomposition of Work: Labor Market Skill Needs are Getting Tougher to Measure

5. Outsourcing arrangements e.g. IBM and Marriott change work arrangements on paper affecting labor market data, but not training needs

6. Patterns in use of temporary & contract workers – Increasingly common use of the contingent workforce

7. Global Supply Chain Leakages -- lost jobs & $$$ through global supply chain mgmt. (decoupling of production, labor and stock price)

8. Work Activity Off-loading -- passing off lower value-added work to assistants/technicians

9. High resolution globalization -- tradable skills, outsourcing specific work functions, not occupations

Where does the U.S. Fit Into an

Increasingly Globalized Economy?

Globalization is Altering Our Perspective

1. Economic theory: what’s wrong with Keynesian economics…global leakage!

2. Employer business practices: the drive for greater productivity and market share in a globally competitive economy

3. Labor supply options: not just U.S. FTEs4. Decoupling of the labor market, stock

market and aggregate production5. Creating competition for Commodities,

Kapital and Natural Resources

“”The world has arrived at a rare strategic inflection point where nearly half its

population—living in China, India and Russia—have been integrated into the global market economy, many of them highly educated workers, who can do just about any job in the world. We’re

talking about three billion people.

Craig Barrett, CEO Intel 01/08/2004

Top 10 Richest World Economies 2006 and growth rate 2000-2006 (mil$)Where are the Growth Markets?

• United States $13,163,870 34.8%• Japan $4,368,435 -6.4%• Germany $2,896,876 52.4%• China $2,644,681 120.7%• United Kingdom $2,376,984 64.8%• France $2,248,091 69.3%• Italy $1,850,961 68.7%• Canada $1,271,593 75.4%• Spain $1,224,676 110.9%• Brazil $1,067,472 65.6%• Russian Federation $986,940 280.0%• India $911,813 98.1%

52%77%

Emerging Markets in a Global Economy:Percent of 2000 & 2007 Revenue Outside U.S.

YUM Brands 34.5% (50.1%)Ford 30.4% (53.1%)Boeing 34.3% (40.8%)Intel 58.8% (84.3%)Coca Cola 61.0% (73.8%)Corning (70.7%)Emerson Electric 40% (51.6%)Accenture (60.5%)Microsoft (38.7%)

IBM 57.9% (57.9%)Motorola 52.5% (49.4%)JNJ 38.2% (47.1%)John Deere 25.1% (34.6%)Colgate 69.4% (80.3%)Nike 50.3% (62.6%)Campbell Soup (31.0%)Molson Coors (55.4%)3M Corporation (61.4)

U.S. Multinational Employment 1982-2005

15,00017,00019,00021,00023,00025,00027,00029,00031,00033,00035,000

Em

ploy

ees

(1,0

00s)

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

US Multinational Employment Affiliate Employment

Subsidiaries of Emerson Electric Company

AIH Inc. (Delaware)

Alco Controls S.A (Mexico)

Artesyn Technologies Inc. (Florida)

Astec International Holdings (UK & China)

Branson Ultrasonic S.A. (Switzerland)

Daniel Industries Inc. (Delaware)

EECO, Inc. (Delaware)

Emerson Capital Corp (Canada)

Emerson Electric Nederland BV (Netherlands)

Bristol Inc. (Australia)

0

500

1000

1500

2000

2500

3000

Bill

ions

of D

olla

rs

Foreign Direct Investment (FDI) Into the U.S. and Abroad 1982-2006

FDI Abroad FDI Inward

Where Does U.S. MNC $$$ Go (2006)?

#1 United Kingdom $364,084 Finance, Other Services

#2 Netherlands $215,715 Holding Cos/Finance

#3 Australia $122,587 Holding Companies

#4 Bermuda $108,462 Finance/Holding Cos

#5 Germany $99,253 Holding Cos/Wholesale

#6 Japan $91,769 Finance/Wholesale

#7 Switzerland $90,085 Holding Cos/Wholesale

#8 Mexico $84,699 Manufacturing/Finance

#9 Ireland $83,615 Chemicals/Information

#20 China $22,228 Manufacturing/Wholesale

Texas Exports 2007• Chemicals Manufacturing $34.9 bil 20.8%• Computer/Electronics $33.7 bil 20.0%• Industrial Machinery $24.8 bil 14.7%• Transportation Equipment $16.3 bil 9.7%• Petroleum Products $14.7 bil 8.8%• Electrical Components $6.7 bil 4.0%• Primary Metal Manufacturing $5.8 bil 3.5%• Fabricated Metals $5.4 bil 3.2%• Agricultural Products $4.6 bil 2.7%• Food & Kindred Prod $3.7 bil 2.2%• Plastic & Rubber Prod $3.4 bil 2.0%• Misc. Manufactured Commodities $2.8 bil 1.7%• Oil & Gas Extraction $1.8 bil 1.1% **94.5 percent of Texas Exports**

How Does Globalization and Free TradeAffect U.S. Industry?

“…Global markets expand the scope for specialization. We do what we do best and

trade for the rest.” Dallas FRB

So, what does the U.S. do best? How does specialization affect job

growth, business practices and educational preparation?

What has Education been doing?Educational Practices and Priorities

Employer Expectations and Education 1950

“Rules and SOP determined who was to do what, and how. Most people were not supposed to think for themselves except in the most narrow of parameters. Original thought could imperil the entire plan.”

Robert Reich Supercapitalism

“Our schools, in every important respect, are very much as we created them at the beginning of the 20th century, when the aim was to build a mass education system that could provide basic literacy for a nation of factory workers, shopkeepers, and (low-tech) farming.”

Tough Choices or Tough Times

Employer Expectations in the 21st century

“Firms that succeed in this [global economy] will constantly be looking for ways to shed their routine work, either by automating it or outsourcing it. They will be constantly preoccupied with the search for competent and highly creative people…”

“Creativity, innovation, and flexibility will not be the special province of an elite. It will be demanded of virtually everyone who is making a decent living, from graphic artists to assembly line workers, from insurance brokers to home builders.”

Tough Choices or Tough Times

To an Educator a “demand” program is one that has high enrollments

To an Employer a “demand” occupation is one where there is a

shortage of workers

Show Workplace Basics

Texas Educational Equilibrium

• TX 2006 University Grads 2006 by Degree

• Annual AVG Openings for Jobs Requiring a Bachelor’s Degree or More

• TX Associates Degree Graduates 2006

• Annual AVG Openings for Jobs Requiring an Associate’s Degree or Postsecondary Award

131,007 Bachelor’s

28,312 Graduate Degree

159,319 All Grads

98,431

57,251 Total GraduatesLess 18,955 General Studies

40,894

38,296 Market Ready

Texas Occupational Imbalances

More Openings than Grads1. Registered Nurses2. Elementary Teachers3. Computer Systems

Analysts4. Software Engineers5. Clergy6. Health Services Mgrs.7. Pharmacists8. Medical Lab Technician9. Training & Development

More Grads than Openings1. Historians & Archivists2. Accountants/Auditors3. Graphic Designers4. Clinical Psychologists5. Journalists6. Art Directors7. Advertising Executives8. Film & Video Editors9. Archeologists

Student Career Interests30,868 Inquiries January 2004-January 2006

1. Doctor, all specialties (2,064)

2. Lawyer (1,816)

3. Teacher K-12 (1,744)

4. Athletes & Coaches (1,238)

5. Law enforcement (1,193)

6. Registered Nurses (1,100)

7. Veterinarians (1,093)

8. Singers/Entertainers (827)

9. Cosmetology/Hairdresser(759)

10. Actors & Directors (506)

11. Architects

12. Biological scientist

13. Auto mechanics

14. Photographers

15. Designers

16. Computer programmer

17. Fire fighters

18. Computer engineers

19. Artists

20. Psychologists

College Major StudentsUnknown/Undeclared 36,528Multi-/Interdisciplinary Studies, Other 32,019Business Administration, Management and Operations 26,378Biology, General 23,880Liberal Arts and Sciences, General Studies and Humanities 18,896Psychology, General 16,961Nursing 15,519Business/Commerce, General 13,863Health and Physical Education/Fitness 13,778Accounting and Related Services 12,854Criminal Justice and Corrections 10,660English Language and Literature, General 8,492History 8,355Electrical, Electronics and Communications Engineering 8,087Educational Administration and Supervision 7,924

Top 15 Fall 2007 Public University Enrollment

Top 15 Fall 2005-2006 Public University Graduates

College Major GradsQuarterlyEarnings

Multi- / Interdisciplinary Studies, Other 8,043 $8,665

Psychology, General 4,364 $5,989

Business Administration, Management 4,061 $9,042

Biology, General 3,745 $5,859

Finance and Financial Management Services 3,130 $9,552

Nursing 3,013 $13,898

Marketing 2,900 $8,091

Health and Physical Education/Fitness 2,816 $6,930

Accounting and Related Services 2,401 $9,107

Criminal Justice and Corrections 2,247 $6,851

English Language and Literature 2,210 $6,520

Political Science and Government 2,098 $6,367

History, General 1,829 $6,400

Liberal Arts and Sciences 1,586 $8,283

Sociology 1,441 $6,395

Fall 2006 graduate seed records were determined by THECB ($8,126 avg. all CIPs)

Highest Paying Majors 1 Year Post-Graduation:Bachelors & Associates Degrees Only

College Major Exit Level Annual Pay

1. Health Professions/Clinical Sciences BA $47,306

2. Engineering BA $45,278

3. Health Professions/Clinical Sciences AAS $44,230

4. Construction Trades AAS $40,120

5. Engineering Technologies/Technicians BA $39,677

6. Science Technologies/ Technicians AAS $37,968

7. Architectural & Related Services AAS $36,737

8. Precision Production AAS $34,167

9. Computer & Information Sciences BA $33,276

10. Business, Mgmt. & Marketing BA $30,851

15. Liberal Arts BA $27,415

**Avg. earnings for entire graduating cohort, not for individual graduates

Texas Economic Signposts to Monitor

1. TX economy is better than, but still mirrors the U.S. Texas is not immune from the same forces

2. Ike lives on. Clean-up costs and job loss still unknown3. TX economy has been buoyed by oil & gas industries

Lower oil prices will slow/reverse job growth. Upside is that the consumer benefits by lower gas prices

4. Manufacturing will continue to shed jobs, globally, due to declining consumer demand, M&A, technology

5. Credit is the lifeblood. TX banks do better but credit still a problem affecting home builders, auto supply chain, credit institutions, commercial construction

6. Defense spending likely to moderate, stunting growth

Texas Economic Signposts to Monitor7. TX real estate market better than U.S. but still a

problem. Likely to cool further, lower property values8. Job loss lags economic declines. Unemployment will

continue to climb, will stay below U.S. averages9. Higher Urates will strain government services. Lower

property values and declining sales taxes will decrease tax revenues and affect local government budgets

10. Ripple effects of slower retail sales, less construction and job loss will impact the service sector. Health care, education jobs will endure.

11. Stronger dollar & slumping global economies will slow U.S. exports, bad for larger exporting states.

There is much more to tell, but this story is over!

Thank you